MARKET POINTS: by Woody Dorsey:
- The Price Highs on 5/20, 6/22 and 7/20 traced out a Significant Distribution Top. The 94% Bullish reading on 8/11 identified the 2105ish area as Key tactical Resistance. The expected “Kill Zone” materialized from that level. Bounces from 8/25 were rejected and resolved into a huge and notable down day on 9/1, generating a 2% Bullish Sentiment reading. But the Recovery from there is gaining steam as, China has gone on “Holiday!” This infers that the Up-trade from 8/25 is continuing and is likely compound in nature. Thus, its conclusion should result in another set up to try the Downside.
- This Decline “becomes harder to Diagnose the longer it lasts.” Still the Intermediate term, “rather than day to day technical trading,” is the best time frame to focus on. I find myself less interested in pushing the Short Side than waiting for set ups. Many assets areas like Energy and Copper have already had huge declines. The question there is when to Buy not when to Short. An unusually Brutal Decline has, “Already Happened” in some of these areas. I have been and continue to look at Energy and EEM for advance tells of important washout Lows. They may have already bottomed but I need to see more trade.
- The break of Key Support @ 2045 suggested that a large scale Correction was occurring. The Plunge into 8/25 has set up an expectation for a test of the 10/15/14 Lows (already achieved by the DOW!) Timing Profiles still suggest more episodes of weakness this Fall before a Base or Bottom is fully formed. And, yes, that process, will in time, resolve into a substantive Rally.
- The recent Market Shock Changed the Market Mind as I allowed. But: “The Market Psyche needs more time to digest what has happened. The longer any “Corrective Behavior persists the more it “infiltrates” the Market Mind.” Pundits suddenly don’t seem quite so sanguine. Financial Culture has begun to “give up” some of its prior Bullish Assumptions.
- Extreme 0%, 1% & 6% Bullish Readings near 8/25 identified a trading Low. Sentiment always has to be interpreted. The recent 2% immediately followed by 90% readings suggests a few more day of upside within an allowable compound Recovery. However, we are heading into a Holiday and one needs to maintain a fluid view of these markets. Upside stabs might persist into next week but are due to wane as the week wears on.
MARKET TIMING:The “Kill Zone allowed for Trend Persistence on the downside. I repeat: “An interim Low is not due until later in September.” Keep an Open Trading Mind. I do not want to anchor on very specific dates in this type of market but 9/23-25 looks like a Low and fits with what I have been indicating for some weeks about a Low due in Late September. Again, this is a very, very tricky timing market. I study my timing profiles every day. For instance, we have already seen some Black Hole Behavior but it was not due this early.
There should be High Volatility around 9/17 which is separate from, but synchronized with, the much heralded FOMC meeting. The preference is for downside to gather momentum after that into the 9/23-25 zone which is due to be the Beige Hole. The more formal Black Hole is actually due in Q4. It may not identify any new price Low but simply “time” the phase when an absolute interim Rally unfolds. The longer that the market looks corrective the better the Buy set up will be.
The double indicant of various Negative Nodes or, Holes, continues to infer a “Complex Compound Correction.” This profile actually makes the market more difficult to diagnose.
MARKET TIMING SUMMARY: Repeat: “Don’t get caught up in minor technical trading. The very short term is much less important than the profile for Interim Term Weakness due into late September.” Note, that some sectors like Oil and Copper have already had almost generational declines.
SENTIMENT INTERPRETATION: DORSEY Market Sentiment suggested that: “An eventual break of 2045 would be a very Public Pronouncement about the Market.” The 94% Bullish on 8/11 identified the 2105ish level as Key Resistance. The 0% and 1% Bullish Readings identified 1870 as the new Support level. The 2% Bullish on the huge Down Day on 9/1 followed by 90% Bullish today argues for more Recovery tries to Neutralize the prior negative extreme. The 1995ish level remains as Upside Resistance.
The DORSEY Intermediate Market peaked near the price High of 7/20. Recent declines in Price and Sentiment produced Panic Negativity which is being resolved by Bounces. However, outright interim Sentiment levels do not by themselves offer a compelling Bottoming signal.
SENTIMENT SUMMARY:The most cogent Sentiment Profile was: “Stocks have the opportunity to, can, and will break down.” Very low Sentiment Readings identified a short term extreme and lawful bounces. I would prefer and, look for, one or two more negative Sentiment clusters in the weeks ahead.
OVERALL MARKET SUMMARY: Equities have confirmed a significant Top. The initial Corrective phase remains “ideally due to last into 9/23-25.” Bouncing may persist into later next week. The FOMC meeting in conjunction with Market Energy near 9/17 looks like it will set up the zone for a down trade. This Fall may remain turbulent and confusing. Note that a huge decline in some sectors and countries has already occurred..
TECHNICAL VIEW by Gary Dean: The SPX best fit pattern of a larger ABC move is still in tact. In last night’s video, I showed an inverted head/shoulders pattern that looked like it could be forming and it has with the upside target being reached today. That also closed one of the open gaps, which has been the norm before any meaningful drops start. There no real sell signals on the short term charts-so we could see the SPX press higher, following the ABC pattern I have been watching.
Please remember, these are just short term technical views. We are in an intermediate down trend which still has time left before the expected low. What I am charting is simply where the SPX could turn lower from-but that is never certain when there is panic out there. If the bulls can continue to press higher-1977-1990 resistance zone could cause some set backs. Above that resistance zone, then we could expect a push to the 2000-2013 area. But again, these higher levels are not certain to be hit.
Resistance Levels-1974-1984-outsider 2000
Support Levels: 1957-1945 outsider 1838
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